PUBLICACIONES XII FORO IBEROMERICANO DE SISTEMAS DE GARANTIA

The apparent success of Fogape does not warrant a blank endorsement of state-financed guarantee programs.

As we have seen in the analysis, there is an important distinction to be made between the individual coverage rate, which should be large, and the total amount guaranteed by the fund, which should be small. In addition, bank profits increase with the coverage rate. Thus, while the provisions that limit the share of individual banks in total rights make sense, it would probably be better to fix a high individual coverage rate and auction guarantee rights to the highest bidder. By doing so Fogape would prevent subtitution and, at the same time, extract rents from banks. How should one evaluate a fund like Fogape? One indicator of the funds success is a default rate which should similar to that for loans to similar firms but who are able to post private collateral. Second, it is not enough to show some additionality-one should measure the extent of susbstitution. Last, one should also evaluate the terms of finance that banks offer to guaranteed firms. As said before, it is unlikely that the borrowers outside option is improved by the guarantee and, as it stands, probably most of the rent accrues to the bank.

José MIguel Benavente, Alexander Galetovic, Ricardo Sanhueza